Story: Appeals Court Overtunes FCC Separate Affiliate Order, 1/11/01.

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Appeals Court Overturns FCC Separate Affiliate Order

(January 11, 2001) The Court of Appeals ruled in ASCENT v. FCC that the FCC's order in its SBC Ameritech merger proceeding permitting SBC to offer advanced services, such as DSL, through a separate affiliate violates the Communications Act. The Court vacated the Order.

Related Documents

Opinion of the Court of Appeals, 1/9/01.

Order approving SBC Ameritech merger, 10/8/99. (Link to FCC web site.)

A three Judge panel of the U.S. Court of Appeals (DC Cir) released its opinion on January 9 in Association of Communications Enterprises (ASCENT) v. Federal Communications Commission (FCC).

The ASCENT, a national trade association representing telecommunications providers and resellers, opposed the merger application (nominally a license transfer proceeding) of SBC and Ameritech. The FCC approved the merger, with conditions.

The Order approving the merger allowed the merged company to avoid statutory resale obligations on certain advanced telecommunications services by providing those services through a subsidiary. The FCC determined that advanced services are telecommunications services like any others and may not be provided by an incumbent local exchange carrier (ILEC) unless the ILEC complies with § 251(c). However, the FCC relied on the "successor or assign" language of the statute to create an exception for separate affiliates.

Section 251

47 U.S.C. § 251(c) requires ILECs "to offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers." Section 251(c) also requires ILECs to negotiate in good faith, to provide interconnection with other telecommunications carriers, to provide unbundled access to network elements where technologically feasible, and to allow physical collocation of equipment necessary for interconnection or access to unbundled network elements.

The ASCENT then filed a petition for review with the Court of Appeals.

Judge Silberman, writing for a unanimous three judge panel, wrote that "... Congress did not treat advanced services differently from other telecommunications services. ... It did not limit the regulation of telecommunications services to those services that rely on the local loop. For that reason the Commission may not permit an ILEC to avoid § 251(c) obligations as applied to advanced services by setting up a wholly owned affiliate to offer those services. Whether one concludes that the Commission has actually forborne or whether its interpretation of "successor or assign" is unreasonable, the conclusion is the same: The Commission's interpretation of the Act's structure is unreasonable. The order of the Federal Communications Commission is vacated."

The FCC is likely to revisit this topic. In addition, many bills are likely to be introduced in the House and Senate that address this issue, or the broader issue of encouraging the deployment of broadband Internet access in all areas of the United States.